The Bank for International Settlements (BIS) and the Inter-American Development Bank (IDB) are joining forces to foster innovation and financial inclusion in Latin America and the Caribbean by exploring and developing technology that can help to modernize the region’s financial systems.
The first collaboration between the two institutions will be on Project FuSSE (Fully Scalable Settlement Engine), which aims to design and test backend functionality that can be adapted to multiple types of infrastructures, allowing them to process a continuously growing number of transactions.
FuSSE aims to test highly scalable systems in three dimensions: the number of transactions, the types of assets and the number of participants. The technology could support payment systems, security settlement systems or even central bank digital currencies.
In its first phase, the project will deliver a proof-of-concept for a basic settlement mechanism. This will be developed as a modular flexible architecture incorporating quantum-resistant cryptography. The modularity allows potential users to adopt the complete set or any subset of modules for their specific purposes. All the software developed will be published and made available on an open source basis to the global central bank community, fulfilling the BIS Innovation Hub’s mission of developing public goods.
This joint project will benefit from the expertise of each institution as well as from central banks in the region that will be invited to join later. The BIS’s experience in technical experimentation and its global scope is complemented by the IDB’s knowledge of the regional systems and their interactions, as well as its tools for reaching out to the region’s relevant players.
The agreement also foresees cooperation on technical assistance and training for national and regional authorities in the technologies used in the project and also envisages a policy dimension to complement the technical work, drawing on the IDB’s closer relationship with countries in the region.
“Financial market infrastructure technologies are complex and expensive. So, creating a community with the region’s central banks to develop Project FuSSE has the potential to enhance these infrastructures and make the whole financial system work better. We look forward to gaining new perspectives as part of this collaboration, and to working together to develop new use cases and design solutions,” said Agustín Carstens, BIS general manager, in a statement.
“The role of new technologies is key to creating a consolidated network of fast and efficient payment and other systems across the region at minimal cost. This can help promote financial inclusion, provide regional integration and reduce poverty in Latin America and the Caribbean. We need to have a secure market infrastructure to support development,” said Ilan Goldfajn, IDB president, in a statement.